Kokomo city officials said the money spent on legal bills during the past 17 months will ultimately pay off for taxpayers through lower employee costs and a broader tax base.

But the short-term cost of the legal spending — including more than $237,000 spent pursuing two annexation cases — has been a significant expense in light of reduced tax revenues.

The numbers show almost all of the $720,000 in legal expenses the city has incurred since Kokomo Mayor Greg Goodnight took office can be grouped into three broad categories.

Annexation

First, the city’s plans to annex about 5,800 acres of unincorporated Howard County has been met by remonstrators. The resulting legal battles are expected to take months, if not years.

For city officials, the proposed annexations are worth the legal expense.

According to the city’s fiscal annexation plans, the two areas targeted for annexation would increase net city general fund revenues by about $1 million per year.

The city’s annexation fight is being handled by Indianapolis law firm Baker & Daniels, which is receiving an hourly rate for the work.

Part of the annexation funding is coming from economic development income tax funds. The $65,000 in EDIT funding was approved by the Kokomo Common Council.

Personnel

The second big expense has come in the area of personnel.

“When you’re revising your benefit plans and reorganizing your work force, sometimes you get some pushback,” said city attorney Derek Sublette. “We have to navigate that, and we have to do it in a legal manner.”

Sublette said changes to insurance benefits, paid time off policy and an impasse in firefighter contract negotiations were responsible for much of the personnel-related legal spending.

The city has turned to the Indianapolis law firm Taft, Stettinus & Hollister LLP for outside help on personnel matters, including arbitration.

From January 2008 through the end of May, Taft had received just more than $122,000 for its services.

“We do a lot in-house,” Sublette said, “but when you’re trying to revamp personnel policies that have been in place for the last 25 to 30 years, policies that are expensive to administer and pretty rich [in benefits], especially in today’s market,” it can be costly.

Probably the biggest battle during Goodnight’s tenure came during negotiations with city firefighters. After Firefighters Local 396 rejected two contract offers, city officials declared an impasse, effectively sending the matter to arbitration.

Firefighters union officials claim they were willing to continue at the bargaining table; city officials countered that the rejected offers were fair. Both sides presented arguments to an arbitration panel, which awarded the firefighters a 1.5 percent raise in 2009 and another in 2010.

Goodnight responded by ending the Kokomo Fire Department’s Emergency Medical Services, allowing Kokomo’s two hospitals to perform all emergency ambulance runs. He also laid off 12 union firefighters, on top of four firefighters he’d laid off earlier in his tenure.

The firefighters pursued a grievance on behalf of the first two firefighters Goodnight laid off, one of several grievances Sublette said the city had no choice but to litigate.

Another grievance that proved expensive for the city was filed by former AFSCME union president Jesse Dixon, who was terminated from city employment in August 2008.

That case was headed to arbitration when the city, represented by Taft, settled with Dixon for $35,000. City officials would not comment on the reason for Dixon’s termination.

The city also settled with former firefighters Matthew Geary and Kevin Duggins — both hired in the last days of former Mayor Matt McKillip’s administration — for about $8,100 each before taxes.

The city also continues to litigate a lawsuit filed by Kokomo police officers Jeff Kirk and Greg Davis, who claim they were unfairly disciplined after raising questions of improprieties within the KPD.

Another Indianapolis law firm, Clark, Quinn Moses Scott & Grahn, has been paid more than $29,000 defending the city in the Kirk/Davis case.

Plant problems

The biggest single chunk of legal spending actually resulted in a net gain for the city.

Under McKillip, the city initiated a lawsuit against a Texas-based engineering firm, ACUS Corp., claiming a filtration system ACUS manufactured was poorly engineered and never performed as promised.

From January 2008 until ACUS agreed to settle in April, the city spent more than $286,000 with Indianapolis law firm Krieg Devault LLP to pursue a lawsuit against ACUS.

Unlike the annexation and personnel litigation costs, the ACUS lawsuit was paid out of city wastewater utility fees, not out of property or income taxes. The $650,000 settlement was also paid into the utility funds.

By way of comparison, the $434,000 in general fund and EDIT money the city has spent on attorneys since January 2008 is almost exactly what the city spent on legal expenses during the two-year period of January 2006 to December 2007.

• Scott Smith is a Kokomo Tribune staff writer. He may be reached at (765) 454-8569 or via e-mail at scott.smith@kokomotribune.com